Dollar surge ahead of Fed meeting

Sterling was the loser on Tuesday as markets had no U.K. data to go on, we saw the pound drop significantly across the board. Brexit fears are back in play with sterling under pressure from an uncertain future for the UK.

Meanwhile investors were waiting for the key central bank decisions from the Bank of Japan, US Federal Reserves FOMC and the RBNZ today so spent Tuesday speculating on how the decisions would go.

The markets have priced in the chance of an interest rate hike from the Fed to some extent but it’s still open to debate whether they will or won’t. A rate hike will strengthen the greenback and traders spent the day putting funds into dollars to the pounds detriment.

The euro faired well early doors gaining against the dollar despite poor inflation figures from Germany. It with nothing from the UK the single currency rallied against the pound all day taking over a cent in all with the door open for further gains today so if you have a euro requirement it would be wise to consider booking sooner rather than later.

The dollar was the winner though, taking over a cent from Sterling and clawing back all the euro had taken earlier in the day even though house data underperformed.

Apart from the central bank meetings today the European Central Bank hold their non policy setting meeting while the UK release public sector net borrowing figures at 9.30am. The Fed meet at 7pm and we close with the RBNZ giving their interest rate and policy statements at 10pm.

As discussed in yesterday’s report we are likely to have further action towards the low yield Yen and US dollar as the carry trade comes into play so more volatility should be expected and if yesterday’s trade is anything to go by, the pound may we’ll be on the losing side again…